New Delhi: The limited spread of Aadhaar unique identity numbers in populous states such as Uttar Pradesh and Bihar may impede government’s plans to keep households from opening multiple bank accounts to take advantage of incentives being offered under its ambitious financial inclusion programme.

Under the Pradhan Mantri Jan Dhan Yojana, announced by Prime Minister Narendra Modi on Independence Day, unbanked households are being encouraged to open bank accounts with the offer of free life insurance and personal accident insurance covers.

The government has been planning to rely on seeding of bank accounts with Aadhaar numbers to ensure that multiple bank accounts are not opened by households attracted by the incentives.

Though Unique Identification Authority of India (UIDAI) has managed to reach more than 80% enrolment in southern states of Andhra Pradesh and Kerala, its reach in northern states like Uttar Pradesh, Bihar, Uttarakhand and Chhattisgarh is much lower since it received government’s mandate to start enrolling in these states only in February.

While enrolment in Uttar Pradesh has reached around 22%, it is about 13% in Bihar.

Some 669 million Aadhaar numbers have been issued by UIDAI so far. The government aims to take the number to more than 900 million by the end of 2015.

At least 20% of the 20 million plus bank accounts opened under the Jan Dhan scheme so far belong to households who already have a bank account, the finance ministry estimates.

The Narendra Modi government launched its financial inclusion mission on 28 August. It aims to provide every household with at least one bank account, which comes with the added benefit of a debit card along with a personal accident insurance cover of ₹ 1 lakh and life insurance cover of ₹ 30,000.

The government has asked banks to use a mix of the voters list and census data to identify households that do not have any bank accounts.

“Only one bank account will be seeded with Aadhaar where biometric identification can be used for verification. Only this account will then get the benefits of both the insurance covers. Though banks have been asked to simultaneously start seeding, Aadhaar linkage will take some time," a government official said, requesting anonymity.

“It is difficult to say how quickly the accounts will be seeded given that they (UIDAI) are still in the process of giving Aadhaar numbers and are yet to make inroads into some populous states," the official said. “We are also clarifying that no one needs to open a new account. We will give a debit card and the personal accident cover with the old account only."

Another government official, who also declined to be identified, said the government has asked state-run banks, which also act as registrars for UIDAI, to enrol people who do not have Aadhaar numbers when they come to open a bank account under Jan Dhan Yojana.

Nearly 70 million bank accounts have already been seeded with Aadhaar on account of the previous government’s direct benefit transfer scheme that sought to transfer the cash equivalent of the subsidies under various government welfare schemes directly into the bank accounts of the beneficiaries, the second official said.

“The approach that we are following at present is asking the customer if they already have an account. In this scenario, we are left to depend on the answer of the customer. Only in cases where the previous and the new accounts were opened using e-KYC (know your customer norms) through the Aadhaar platform, it is ensured that there is no duplication," said Rishi Gupta, chief operating officer and executive director of FINO PayTech, a banking correspondent service provider. “There is a need for some kind of a central depository to solve the problem of identifying multiple accounts," Gupta said.